Building a Food Safety Culture, Part 1 ROI
Julia Stewart:
Hi, this is PMA PR Director Julia Stewart, and welcome back to PMA’s audio blog, “Ask Dr. Bob.” PMA’s Chief Science Officer Dr. Bob Whitaker and I are continuing our talk about why and how to build a food safety culture. In our last post, Dr. Bob presented the reasons for why we as an industry need to have a different type of food safety discussion and look at the issue differently than we have in the past.
Bob, in addition to meeting consumer expectations and protecting our business, what else should we be considering with respect to the food safety discussion?
Bob Whitaker:
Julia, food safety has to be seen by top management as a mandatory business function – just as important to the operation of the company as sales, production, or human resources. It should be fully integrated into the fabric of the company and executed daily, even in a tough economy.
To accomplish that goal, the food safety program needs to be adequately resourced. Suppliers cannot be expected to shoulder food safety costs all on their own, but the cost each company does bear should be viewed in the same context as one would look at capital outlays for equipment – that is, it should be looked at on a return on investment basis. We have no problem in this industry calculating the return on investment if we need to buy a new packing line or tractor, we simply look at the cost and then determine the opportunity to be gained and the time required to pay off the investment. We should do the same thing for food safety.
To explain the ROI analogy, let’s say we have a hypothetical company, one that handles 20 million cartons a year and has $150 million in total sales. Without going into all the specifics here, I estimate that a good-quality food safety program for our hypothetical company would cost between $850,000 and $1 million per year. So what percentage of company expenses is that? If you take the high end of that cost range, $1 million, that is still only 0.6% of that hypothetical company’s total sales. Compared to raw products, packaging, labor and fuel, it turns out food safety is a minor expense. $1 million represents a nickel a box over the 20 million cartons our hypothetical company sells per year. To give you some perspective, the box alone, empty and palletized, costs over a dollar.
So, assuming we spend our money well and our little company has effectively integrated food safety into its corporate culture; that investment now permits us to effectively manage the potential risks associated with our products. In our analysis of return on investment, we are spending a million dollars to protect the assets of our company. Perhaps another way to look at it is that your million-dollar-a-year investment helps protect your $150 million per year in sales. If you are unfortunate enough to have a food safety crisis associated with your products, what would happen to your sales? There is a pretty good chance your sales would take a big hit, and you would have to expend resources to execute a recall, pay legal fees, public relations fees, perhaps fines, write off crop losses and inevitably have increased insurance costs going forward.
The million dollars may also be viewed as an investment in the future of your business. To be able to confidently communicate your food safety program to a customer and clearly demonstrate your risk assessment and management procedures should help you to secure an existing customer, and to reassure a prospective customer. Lastly, perhaps your million dollar investment lets you sleep better at night, knowing you are doing all you can to ensure your products are as safe as possible. I’ve talked to a lot of people at companies who have been through food safety issues where people have been injured, and they tell me there is almost no price they wouldn’t pay to reverse those injuries.
Julia:
Thank you, Bob. That explanation really helps us see food safety not as an expense line on a budget that needs to be minimized, but rather from an ROI perspective and how it’s the right thing to do not only for our consumers, but also for the health of our company.
Thanks very much to our listeners, please join us again next time!